Effects of Social Insurance on Crime and Political Participation
Social transfers to households are a dominating part of the government budget in most countries (32% of total government expenditures in Denmark last year),1 and understanding how citizens react to various transfers is key for assessing the welfare consequences of these programs. While some aspects of these behavioral responses, such as consumption or job search intensity, are well understood, other types of behavior such as crime, democratic participation, and social integration, have received much less attention, even though these broader, more extensive consequences of social insurance are likely to be highly important for the total benefits, and thereby the optimal design, of the programs. In this project, we propose to analyze the broader welfare consequences of unemployment benefits along two dimensions that extend beyond just the beneficiary himself and the period of time on benefits. We do this by asking how the generosity of unemployment insurance affects criminal behavior and political participation. These types of behavioral responses might not only have long-term consequences for the individual; they also impose externalities on other citizens. Both outcomes are relevant to policy makers in the design of social insurance programs and they potentially have substantial welfare consequences,but they are not well understood or quantified in the existing literature. As will be explained in detail below, we will use a unique combination of Danish administrative data and policy variation from several reforms to provide the first evidence of the causal effect of unemployment benefits on crime and political participation.